An international research grant is rarely denominated and spent in the same currency for the life of the award. A European consortium partner may receive euros from Brussels but pay staff and suppliers in Swiss francs or pounds sterling; a US-funded subrecipient in another country converts dollars into local currency to cover costs; a UK-based investigator on a multi-year award budgets in pounds against costs that will actually be incurred, years later, in a currency that has since moved against it. Because grant budgets are typically fixed in nominal terms at the point of award but spent over one to five years, currency movement between award and expenditure is not a hypothetical risk — it is a structural feature of any grant that crosses a currency border, and research administrators managing international awards need a working approach to it.
Why Exchange-Rate Risk Is a Real Budget Risk, Not a Rounding Error
Exchange-rate movement matters for two related reasons. First, most grants are awarded as a fixed nominal amount in the funder’s currency, set at the time of application or award — not adjusted automatically as rates move. Second, multi-year projects create a gap between the exchange rate implicit in the original budget and the rate actually available when funds are drawn down, converted, or spent, sometimes several years later. A currency that depreciates against the award currency during that gap effectively shrinks the local-currency value of the grant; a currency that appreciates effectively grows it. Neither direction is guaranteed, and the size of the swing over a three- to five-year project period can be material — major currency pairs have moved by double-digit percentages within single-year windows in recent years, an amount that can be the difference between a project completing its planned scope and a project needing to cut activities or request a no-cost extension.
The risk is asymmetric in its consequences even when the underlying probability is roughly symmetric: a favorable move rarely triggers any institutional process (the funds simply go further), while an unfavorable move can force a scramble to reduce scope, find bridging funds, or renegotiate deliverables. That asymmetry is why research offices and institutional finance teams treat exchange-rate exposure as something to manage proactively rather than something to simply absorb if and when it becomes a problem.
Where FX Exposure Actually Enters a Grant
Currency exposure on a grant is not one single event but a chain of conversion points, and where in that chain the exposure sits affects what an institution can do about it:
- Award currency vs. institutional accounting currency. If a grant is awarded in a currency different from the currency the recipient institution uses for its own books (for example, a euro-denominated Horizon Europe award held by an institution that accounts in pounds sterling, or a subaward paid in US dollars to a foreign subrecipient that pays local staff in local currency), every draw-down or reimbursement claim involves a conversion.
- Budget-setting vs. spend-down. The exchange rate assumed when a multi-year budget was built at proposal stage is very unlikely to be the rate in effect years later when the money is actually spent, even if no cross-border payment is involved at all — this matters most for projects with subawards, procurement, or personnel costs denominated in a currency other than the award currency.
- Subrecipient and consortium-partner conversions. On multi-partner international awards (typical of Horizon Europe consortia or NIH awards with foreign subrecipients), each partner may convert from the lead currency into its own operating currency independently, at different times, at different rates — multiplying the number of conversion points and the aggregate exposure across the consortium.
Common Institutional Approaches to Managing the Risk
No single method eliminates exchange-rate risk on a multi-year international grant; in practice, institutions combine several of the following, chosen based on the funder’s own rules (see the next section), the size of the award, and the institution’s own treasury capacity.
Fixed-rate budgeting at award
The simplest approach: convert the award using a single exchange rate fixed at a defined point (grant agreement signature, award notification, or start date) and hold the local-currency budget fixed at that figure for the life of the project, absorbing any subsequent movement as a program risk rather than revisiting the budget. This is administratively simple and is effectively required by funders that do not permit currency-driven budget revisions (see NIH below), but it concentrates all the risk on the recipient.
Periodic re-budgeting against a published reference rate
Some funders and institutions instead re-convert costs at intervals using a published, non-discretionary reference rate rather than a single rate fixed at the outset. The European Commission’s InforEuro rates — the Commission’s official monthly accounting exchange rates, also used for currencies not covered by the European Central Bank — are the standard reference for Horizon Europe beneficiaries who account in a non-euro currency; UKRI separately publishes its own Currency Conversion Tool guidance for Horizon Europe Guarantee-funded UK participants, since the UK Horizon Europe Guarantee itself involves a sterling-to-euro conversion step. Using a defined published rate, rather than an institution’s own ad hoc rate, is largely about auditability: a funder or auditor can independently reproduce the conversion an institution used.
Contingency or buffer lines in the budget
Where a funder’s rules and the proposal template allow it, institutions sometimes build an explicit contingency line into the budget to absorb moderate currency movement without requiring a formal budget revision. This is a self-insurance approach rather than a hedge: it does not remove the risk, but it creates headroom for the ordinary range of movement so that only a genuinely large swing forces a scope or timeline conversation with the funder.
Financial hedging instruments
Larger institutions with treasury operations sometimes hedge material, known foreign-currency exposures — for example, a multi-year subaward payment schedule to a foreign partner in a known currency and amount — using instruments such as forward contracts (locking in a future conversion rate today) or, less commonly for research grants specifically, currency options. This is far more common at the institutional treasury level, managing aggregate foreign-currency exposure across many awards and other university activities, than as a grant-by-grant decision made by an individual principal investigator or department; it also generally requires funder permission to charge hedging costs to the award, which is not universal. Research administrators should treat hedging as a question to route to the institution’s central treasury or finance office rather than something to arrange per-project.
Requesting the award in a single, stable currency
Where a funder allows the applicant to choose the award currency (Wellcome Trust is an explicit example, discussed below), requesting the award in the currency the recipient will actually spend in removes most of the exposure at the source, rather than managing it after the fact. This only works where the funder offers the choice and where a single currency genuinely covers the bulk of planned spend; multi-country consortium awards typically cannot avoid multi-currency exposure this way, since different partners spend in different currencies regardless of what currency the prime award is denominated in.
How Major Funders Actually Treat Exchange-Rate Variance
Funder rules on this vary substantially, and the exact treatment is worth confirming directly against current funder guidance for any specific award rather than assumed from general practice — but the broad postures of a few major funders are instructive and fairly stable over time.
NIH
NIH’s general position, as reflected in the NIH Grants Policy Statement’s treatment of foreign grantees, is that award budgets, funding requests, and financial reports must be stated in US dollars, and that NIH does not routinely issue supplemental awards to compensate for currency exchange fluctuations after an award is made. In practice this places exchange-rate risk squarely on the foreign grantee or the domestic institution managing a foreign subaward: a currency movement that erodes the local-currency value of an NIH award is not, as a matter of routine policy, NIH’s problem to fix. Institutions managing NIH awards with foreign components should budget conservatively for currency movement rather than assume a rate shortfall can be made up later through a supplement request. See CASRAI’s guide to NIH foreign subaward requirements for the broader compliance picture on NIH’s foreign-component rules.
Horizon Europe / European Commission
Horizon Europe beneficiaries who keep their accounts in a currency other than the euro convert costs into euros for reporting using the average of the daily exchange rates published by the European Central Bank (via the Official Journal’s C series) over the relevant reporting period, or InforEuro rates for currencies the ECB doesn’t cover — a defined, non-discretionary method rather than an institution’s own choice of rate. Beneficiaries whose organizational accounts are already kept in euros generally use the rate their own normal accounting practice applies. UKRI, separately, publishes Currency Conversion Tool guidance specifically for the UK’s Horizon Europe association arrangements (the “Horizon Europe Guarantee” mechanism used historically for UK participants), including guidance on the rate applicable as of a grant agreement’s entry-into-force date. See CASRAI’s Horizon Europe overview and UKRI grants guide for the surrounding funding-mechanism context.
Wellcome Trust
Wellcome takes an unusually explicit position, published as a dedicated grant currency exchange policy: grants are normally awarded in a single currency, chosen by the applicant as the currency expected to best support the funded activity (typically the applicant’s local currency), and multi-currency awards are made only in exceptional circumstances. Once awarded, the recipient organization bears the cost if research costs increase because of currency movement in the currency it chose. Wellcome will only consider providing supplementary funds where the grant was not awarded in the currency the applicant originally requested, currency movement has increased costs as a result, and there is a genuine risk the funded activity cannot be completed — and Wellcome asks that any such request be raised in the final 12 months of the award, not as a running adjustment throughout the project. This makes currency selection at application stage, not hedging or re-budgeting later, the primary lever Wellcome grant holders actually have.
The general pattern across funders
Across all three of the above, and consistent with how most major funders treat currency risk, the default rule is that the recipient institution bears exchange-rate risk once an award is made, and funders provide, at most, narrow and discretionary relief for extreme movement rather than routine rate-adjustment mechanisms. Where a funder offers a lever — currency choice at application (Wellcome), a defined non-discretionary reference rate (Horizon Europe/InforEuro), or neither (NIH) — that lever needs to be exercised or planned for at the design stage of the budget, not discovered after a rate move has already created a shortfall.
Practical Recommendations for Research Administrators
- Confirm the funder’s specific currency rules before the budget is built, not after award — whether the award currency is fixed, whether the applicant can request a different currency, and what conversion method (if any) the funder specifies for reporting.
- Route material hedging decisions to institutional treasury/finance, not the individual PI or department — hedging instruments are typically managed at the aggregate institutional level and may not be chargeable to the award without specific funder permission.
- Build a documented, defensible conversion methodology for any award that requires currency conversion for financial reporting, using a published reference rate where the funder allows discretion, so the method is reproducible in an audit.
- Flag multi-partner consortium awards for extra scrutiny — each partner’s independent conversion timing and currency multiplies the aggregate exposure and the number of places a discrepancy can arise.
- Budget conservatively rather than optimistically where the funder does not adjust for adverse movement (NIH is explicit about this) — a contingency allowance, where the funder’s rules and template permit one, is cheaper than a mid-project scope cut.
- Monitor exposure across the life of the award, not just at budget-setting, particularly on longer (four- to five-year) awards where cumulative movement is more likely to become material than on a one-year award.
Frequently Asked Questions
Does a research grant get adjusted automatically if exchange rates move?
Generally no. As the NIH and Wellcome examples above illustrate, major funders typically treat the awarded amount as fixed and place the risk of exchange-rate movement on the recipient institution, with at most narrow, discretionary relief available in extreme circumstances rather than automatic adjustment.
Can a university hedge currency risk on an individual grant?
It’s uncommon at the individual-grant level. Where hedging happens, it is typically managed by a central institutional treasury function looking at aggregate foreign-currency exposure across many awards and other activities, not arranged separately for a single grant by the department or PI, and it usually requires confirming with the funder whether any hedging cost can be charged to the award.
What reference exchange rate should be used for reporting on a Horizon Europe grant?
Beneficiaries who keep accounts in a non-euro currency convert using the average of the daily European Central Bank exchange rates published in the Official Journal’s C series over the relevant reporting period, or InforEuro rates for currencies the ECB does not cover — not an institution’s own discretionary rate. Confirm the current method in the specific Grant Agreement and the European Commission’s Annotated Grant Agreement guidance, since reporting mechanics are periodically updated.
Does choosing the award currency at application eliminate exchange-rate risk?
It reduces it for single-currency projects but does not eliminate it for multi-partner or multi-country awards, since different consortium partners typically still spend in different local currencies regardless of what currency the prime award is denominated in.
For the broader financial-compliance context this sits within, see CASRAI’s guides on co-funding and matching-funds requirements in international collaborative grants and FDP subaward templates, including foreign variants, and the dictionary entry on the subaward mechanism generally.
